S&P Daily Chart (Nov2015 to Jan2016: Past few months)
Here's Friday's red candle bringing S&P Futures to 1876.5 on the S&P500 daily chart (zoomed out(

Between December 30, 2015 and January 15 -- the S&P500 dropped from 2075 to 1849 -- a roughly 226 pt drop in just two weeks. Here's a summary of what happened -- starting off with:
1)a leading diagonal,
2)a 3rd wave drop that finished A wave down--
3) a B-wave triangle --
4)a 3rd wave that ended with a truncated 5th wave,
5) an ascending 4th wave triangle --
6) a clear 5th wave down --
7) a hero 4th wave that fell apart overnight into what might be capitulation 5th wave with a V-shape bottom.
S&P Hourly Chart (Dec 30, 2015 - Jan15, 2016: Past 2 weeks)

Zooming in, the intraday 5 minute char began at the at the market open 9:30am at 1860, went as low as 1849 at 12:40pm, and then closed at 1876:
S&P 5 Min Chart (Just Friday, Jan 15, 2016 7am to 5pm))
 Last night, I was expecting a B-wave drop - did not expect us to break yesterday's low at 1871 at the open.
Yesterday's 5 minute chart (Hero Rally that Failed and dropped from 1917 to 1849)

Instead, today (really overnight, we had an A down to 1912, a B up to 1921, then the C-wave down supposedly -- but that extended way beyond what I expected. I'm also having trouble properly labeling the drop.

The V-shaped bottom at 12:40pm EST was also an unusual pattern.
New Trade
We did initiate a new trade for next week to take advantage of the elevated volatility level in options and time decay over the weekend. Good thing we shorted calls at yesterday's high and cashed out half of our trade up there. With elevated volatility, you never know what happens overnight.
Looking at the overnight S&P500 Drop Thursday night into Friday close

The markets had a turbulent week - markets down 8% for the year and it's only two weeks in.
 
The VIX futures reached up as high as 28.3. The first day of the New Year, VIX was jsut below 20.
 
Most notably, there was a huge drop overnight from Thursday's rally high down below what I thought was the temporary bottom -- 1871--we went all the way down to 1849.25. Since then, the market has been limping back up just ever so slightly certainly not with the power of and quickness of the sharp rally we experienced on Thursday.
 
This week we shorted a putspread betting that the market would stay above 190 -- but on Wednesday we exited because the market just broke 1900 and we didn't want to take any chances. We took the small loss of a hundred or so.
 
But on Thursday morning, we re-entered that trade -- this time shifting our strike from 190 to 186.
 
The market dipped and then rallied quickly - and our short putspread reached 70% of max profit in like an hour -- so we cashed out half of the profits there. Took profits of few hundred here.
 
At the top of the rally, we initiated a second bet using short calls betting that the market would stay below SPY 196.
 
Good thing we put on this trade, because what happened over night was the market completely tanked. So those calls expired today worthless and we collected our max profit of a few hundred. 
 
On Friday, the market just puked - and so while our short calls made money, since SPY broke Thursday's low on Friday - we had to exit our trade. In the end, our bet was right, SPY closed above 186 -- but since it get real close, we didn't want to take the risk on that second batch.
 
So all together, we were only up like $50 -- effectively flat.
 
So this past week, we shorted put spreads -- why is this a good strategy in this market environment?
Well, I mentioned before that volatility is highly elevated at 28. When volatility is high, then options are somewhat inflated in value. Since all options eventually expire to 0 if they are out-of-the-money -- this means that the value of puts are a bit higher than usual -and there's still some value and some puts that are several strikes away from where the currently is trading ...